Corporate taxes are currently taxed at 21%. For those firms with debt, interest payments are tax-deductible. However, firms with debt are also subject to potential costs of financial distress. Finally, there is asymmetric information between investors and corporate insiders and capital structure decisions may signal information to investors. In this real world environment, which of the following are true?

A) firm value increases and WACC decreases initially as more debt is added to the firms capital structure, however, there comes a point where adding additional debt generates potential costs of financial distress that outweigh the benefits of further reducing taxes.

B) each firm has an optimal capital structure where firm value is minimized.

C) firm value and WACC are independent of the firms capital structure

D) Firm value increases and WACC increases initially as more debt is added to the firm's capital structure, however, there comes a point where adding additional debt generates potential costs of financial distress that outweigh the benefits of further reducing taxes. after this point, firm value and WACC start to decrease as more debt is added.

E) each firm has an optimal capital structure where WACC is maximized